Paul and Jim talk about the proposed changes of the Financial Industry Regulatory Authority (FINRA) to complex investment products. In a recent ThinkAdvisor article, industry leaders agreed that some products are too dangerously complex for investors and then debated if a competency test for investors is the right answer. Listen along as Paul and Jim discuss the issues around complex investments and how this kind of test would also create barriers to prudent investing. In the second half of the show, Paul addresses a listener who wanted to know how Paul makes a budget.

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Paul and Jim talk about a company who claims to be practicing evidence-based investing but is really using short-term track records to sell investment products to people who are afraid of current market conditions. Jim encourages you to avoid products that are being sold based on their recent performance because investing is not about getting rich quickly; rather, it’s about building wealth over a lifetime. Paul warns investors not to get stuck in a cycle of ditching one bad investment while the market is down just to buy another one.

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This has been a tough year for a lot of investors who realized their portfolios had more risk in them than they thought. Today, Paul encourages the investors who are looking to recover and learn from their mistakes. It is always the right time to diversify and minimize your risk. You never know how markets are going to recover, and you could get hit hard by being overweighted in an area when the market goes down, only to be hit hard again by being underrepresented in the areas that experience the biggest bounce backs. Later in the episode, Paul talks about how inflation could ease government debts.

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Paul shares the WSJ article “It’s the Worst Bond Market Since 1842. That’s the Good News.” He highlights some common misconceptions that people have about bonds and then explains how inflation affects bond prices. Listen along to hear why Paul doesn’t allow the maturity rates of bonds to get too long and why you should hold on to some cash in a portfolio. Later in the episode, Paul shares three reasons we fall for conspiracy theories.

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Paul and Evan have a fun time reading through an article that lists all the potential reasons your advisor might be a bad fit. Listen along to hear which reason is the most dangerous and whether Paul and Evan agree. Later, Paul and Evan joke about how the financial industry twists research into predictions about the future.

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